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Debt debate continues despite Coalition Greens deal

MARK COLVIN: Federal Parliament has begun debating the Government's proposal to remove the cap on the Commonwealth's debt and securities.

The parliamentary debate is already being punctuated by another exchange of insults between the Government and Opposition on economic management.

The Coalition's economic plans will be under scrutiny in the weeks before Christmas when the mid-year budget update is released.

But Labor is hoping to use a Senate inquiry to draw attention to one particular area of the budget, a $4.5 billion reduction in foreign aid spending.

From Canberra, Naomi Woodley reports.

NAOMI WOODLEY: The Federal Government's deal with the Greens to remove Australia's debt ceiling has been the main topic of discussion all day, and the Opposition Leader, Bill Shorten, continued Labor's critique in Question Time.

BILL SHORTEN: My question is to the Prime Minister. Given the Prime Minister said before the election that we can never build a better future by doing cheap and tawdry deals with the Greens…

(Laughter)

…Why is one of the Prime Minister's first items of business after the election to do a tawdry deal with the Greens to allow unlimited debt?

TONY ABBOTT: Madam Speaker, we have come to an arrangement with the Greens on this particular subject because it was impossible to come to a sensible arrangement with the Labor Party. And when it comes to economic responsibility, the current Labor Party is worse than the Greens.

NAOMI WOODLEY: The Coalition and the Greens do make odd bedfellows, but with the current debt ceiling of $300 billion due to be breached next week, a solution had to be found.

The planned removal of the cap, in exchange for extra information in budget papers about debt, and regular reporting to Parliament, has given both the Greens and Government political grist for their respective mills.

The Greens Leader, Christine Milne, believes it'll force the Government away from deep cuts to spending.

CHRISTINE MILNE: And what this does means that the Government will have no excuses. Next year, in the budget, they have every tool available to them.

NAOMI WOODLEY: But for the Government, it is added flexibility, as it grapples with a self-imposed task of returning the budget to surplus.

ARTHUR SINODINOS: No-one should think that this is somehow a free lunch. The standards which have been set in terms of transparency are very high. But we will meet those standards, because we are committed to reducing the deficit and debts we inherited. The mid-year economic and fiscal outlook will outline the full extent of the problem.

NAOMI WOODLEY: The mid-year update, or MYEFO, is also expected to give a preview of some budget cuts.

The Opposition is hoping it'll include more details about one measure announced before the election - a reduction in the growth of foreign aid spending to the tune of $4.5 billion.

TANYA PLIBERSEK: We will see the effect of this reduced funding. The amount is so large that it's unquestionable that the effect will be felt by organisations in Australia that work overseas, and by our friends in the region as well.

NAOMI WOODLEY: The Opposition's foreign affairs spokeswoman, Tanya Plibersek, is following up this week's criticism of the Government's smaller than expected contribution to a worldwide effort to contain malaria, tuberculosis and HIV, by calling for a Senate inquiry into Australia's whole foreign aid program.

TANYA PLIBERSEK: There's two areas, really, that concern me greatly. One of the changes that we made in our aid delivery is to really put a focus on gender sensitive development, and the reason is that economies where women are educated, where they participate freely in the workforce, and participate in decision making are generally much more successful economies.

The second area that I'm very worried about losing is the focus on disability. Australia has really led the world on having a disability focus in our aid.

NAOMI WOODLEY: Isn't difficult for Labor, though, to mount any effective argument about this level, or this reduction in foreign aid spending, given that you wouldn't do a deal on the debt ceiling?

TANYA PLIBERSEK: No, not at all. You've got to remember that Joe Hockey, unasked for, unbidden, gave $9 billion to the Reserve Bank. If Joe Hockey was serious about debt, I don't know why he would, as one of his first moves as Treasurer, give $9 billion to the Reserve Bank. That's twice the amount we're talking about in the aid budget.

NAOMI WOODLEY: The Opposition will need the Greens to support the inquiry. If they do, hearings are likely to be held next year.